Introduction
Starting a business can be overwhelming. It seems as though there are endless things to do and think about, and one of the important ones is obtaining an EIN Number. This article will provide a step-by-step guide on how to get an EIN number, the benefits of having one, FAQs, online resources, and things to consider when applying for one.
Step-by-Step Guide for Obtaining an EIN Number
An EIN number is a unique nine-digit number issued by the Internal Revenue Service (IRS) to businesses, non-profit organizations, and other entities. Here are the steps to obtain an EIN number:
Step 1: Understand what an EIN number is
As mentioned earlier, an EIN number is a unique nine-digit number issued by the IRS, and it helps to identify a business entity for tax purposes.
Step 2: Determine the eligibility criteria for obtaining an EIN number
Most businesses and organizations are eligible to obtain an EIN number with very few exceptions, such as sole proprietors who do not have employees, and specific types of organizations that are not required to file tax returns.
Step 3: Decide on the type of business entity for which the EIN number is required
There are several types of business entities including sole proprietors, partnerships, limited liability corporations (LLCs), and corporations. Each entity type has its own rules for obtaining an EIN number, and therefore it’s crucial to determine the correct entity type before filling out the application form.
Step 4: Fill out the EIN application form
The IRS provides form SS-4, which is the application form for obtaining an EIN number. This form can be filled out online or by mailing it to the IRS. The application form requires information such as the business name, mailing address, and business type to help the IRS establish the entity’s identity.
Step 5: Submit the application to the IRS
The completed form can be submitted to the IRS by mail, fax, or online. If done online, the business will receive an EIN number automatically upon submission. However, if submitting by mail or fax, the process can take up to four weeks for the IRS to process the application and provide the EIN number.
Step 6: Receive the EIN Number
Once the IRS approves the EIN application, the business will receive the EIN number by mail. It is important to keep the EIN number in a safe place as it will be required for various business transactions, such as filing taxes or opening a business bank account.
Benefits of Having an EIN Number
Now that we know how to obtain an EIN number, let’s discuss the benefits of having one:
Simplifies tax filings
Businesses with EIN numbers can file their tax returns with ease as the number helps the IRS to identify the business entity correctly.
Helps to separate business and personal finances
Having an EIN number allows businesses to open business bank accounts, apply for business credit, and keep their business transactions separate from their personal finances.
Required for hiring employees
Businesses that employ workers are required by law to have an EIN number. It helps the IRS to track payroll taxes that employers must withhold from their employees’ paychecks.
Can be used to establish business credit
Having an EIN number and good credit history can help businesses to secure loans and credit that are essential for business operations.
FAQs on EIN Numbers
What is an EIN Number?
An EIN number is a unique nine-digit number issued by the IRS to identify a business entity for tax purposes.
Who needs an EIN Number?
Most businesses and organizations that meet eligibility criteria for tax purposes require an EIN number. Some exceptions include sole proprietors and specific types of organizations that are not required to file tax returns.
How long does it take to get an EIN Number?
It takes up to four weeks for the IRS to process an EIN application submitted by mail or fax. However, if the application is submitted online, the business will receive the EIN number automatically upon submission.
How can I apply for an EIN number?
The IRS provides form SS-4, which is the application form for obtaining an EIN number. The form can be completed online, by fax, or by mail.
Can I use the same EIN Number for multiple businesses?
No, each business requires a unique EIN number to distinguish its identity and tax obligations.
How Long Does It Take to Get an EIN Number?
The processing time for an EIN number is typically up to four weeks if the application is submitted by mail or fax. However, the process can be expedited by completing the application online.
Online Resources for Obtaining an EIN Number
The following are online resources for obtaining an EIN number:
Official IRS website
The IRS provides an online portal for EIN applications on its official website.
Third-party vendors who offer the service
Several third-party vendors offer EIN application services, such as LegalZoom and incorporate.com.
Pros and Cons of using third-party vendors
Using a third-party vendor can streamline the application process and provide expert guidance. However, it can be more expensive and may be unnecessary for simple applications.
Things to Consider When Applying for an EIN Number
It is crucial to consider the following when applying for an EIN number:
Eligibility requirements
Not all businesses and organizations are eligible to obtain an EIN number. Businesses should confirm their eligibility before completing the application.
Type of business entity
It is important to determine the correct business entity type before applying for an EIN number to ensure the correct form is filled out.
Obligations for paying taxes
Having an EIN number does not exempt businesses from paying taxes as required by law. Businesses should understand their tax obligations and file returns accordingly.
Common Mistakes to Avoid When Applying for an EIN Number
When completing an EIN application, it is crucial to avoid the following common mistakes:
Providing incorrect information
Mistakes such as incorrect spelling of the business name or incorrect mailing address can cause delays in the application process.
Filling out the wrong form
Each type of business entity has its own form for EIN applications. Filling out the wrong form can cause delays or rejection of the application.
Not knowing the business entity type
It is essential to determine the correct business entity type before applying for an EIN number to ensure the correct form is filled out.
How to avoid these mistakes
To avoid these mistakes, businesses should take their time when filling out the application form and seek expert guidance if necessary.
Conclusion
An EIN number is a crucial requirement for businesses and organizations to identify their entity for tax purposes. Hopefully, this comprehensive guide has provided insight into the importance of having an EIN number, how to obtain one, the benefits, FAQs, online resources, things to consider, and common mistakes to avoid. Don’t delay obtaining an EIN number – it is a crucial step in establishing and growing a business or organization.
